GS Analyst: Daily Current Affairs

Hindenburg Research, a US-based short-seller firm, recently announced its decision to cease operations. This closure has stirred a range of reactions, particularly due to the firm’s involvement in publishing a highly controversial report in 2023 that caused a significant drop in the market value of a major corporate group. Hindenburg's closure has led to speculation about its reasons, its business model, and the broader impact on markets.

What Happened?

• The 2023 Report: In January 2023, Hindenburg published a report accusing a prominent corporate group of financial irregularities and market manipulation. The report claimed that the group had engaged in corporate fraud, leading to a dramatic loss of value in the company’s shares. The accusations caused a ripple effect in the stock market, wiping out billions of dollars in value. The company and its promoters denied the allegations.
• The Decision to Close: In January 2024, Hindenburg announced its decision to shut down its operations. The firm's founder stated that it was a personal decision, unrelated to any external threat or personal health issue. However, critics have suggested that regulatory scrutiny, legal challenges, and financial viability issues might have contributed to the closure.
• Legal and Regulatory Pressure: The closure of Hindenburg coincided with ongoing investigations by regulatory bodies. Some experts believe that Hindenburg may have decided to shut down in order to avoid potential penalties. Concerns have been raised about the firm’s business model, which involves short-selling stocks and publishing negative reports on companies, often without full transparency regarding its financial interests.

Reasons Behind the Closure

• Legal Scrutiny: Hindenburg faced intense legal scrutiny after publishing its report. Regulatory bodies in several countries, including India, launched investigations to determine whether the firm's actions were part of a broader scheme to manipulate markets or destabilize companies for profit. The firm’s decision to close operations might be a response to these investigations.
• Financial Viability: The firm’s business model has been questioned for its long-term sustainability. Short-selling, while profitable in some cases, rarely provides consistent returns. Experts suggest that the firm’s approach, which combined publishing reports with taking short positions on the targeted companies, could have led to financial challenges. As markets recover and regulatory scrutiny increases, sustaining such a model could become increasingly difficult.
• Political and Market Pressures: There are also claims that external political and market pressures may have played a role in the firm’s closure.

Impact

• Stock Market Volatility: The report published by Hindenburg in 2023 had a significant impact on the stock market. The targeted company saw a steep decline in its market valuation, which led to a wider ripple effect in global financial markets. Although the company has since recovered much of the lost ground, the incident raised questions about the power of short-sellers and the potential risks to market stability.
• Public Perception of Short-Selling: The closure of Hindenburg has sparked a wider debate about the ethics and impact of short-selling. While some see short-selling as a legitimate market practice that helps expose financial mismanagement, others view it as a predatory activity that harms companies and markets. Hindenburg’s approach—publishing critical reports while simultaneously taking short positions—has been criticized for creating conflicts of interest and potentially manipulating market sentiment.
• Regulatory Concerns: The closure has drawn attention to the effectiveness of current financial regulations. Authorities are now focusing on ensuring that firms engaging in short-selling and similar practices are held accountable for their impact on market integrity. The closure of Hindenburg may prompt a re-examination of how such firms operate and whether new rules are needed to protect investors and maintain market stability.

January is Cervical Cancer Awareness Month, a time when doctors urge women to get screened for cervical cancer, an important health issue, especially in India. Let's break down why this disease is a concern and what can be done to prevent it.

What is Cervical Cancer?

• Cervical cancer develops in the cervix, the lower part of the uterus (womb) that connects to the vagina.
• It is one of the leading causes of cancer among women in India. The primary cause of cervical cancer is Human Papillomavirus (HPV)
• Around 7% of cervical cancers worldwide are caused by certain types of HPV.
• Cervical Cancer Burden in India: Cervical cancer is the third most common cancer among women in India, with an incidence rate of 18.3%, translating to around 123,907 cases It is also the second-leading cause of cancer-related deaths among women in the country.
• Key statistics:
• Cervical cancer accounts for 6-29% of all cancers in Indian women.
• The highest incidence of cervical cancer is found in Papumpare district, Arunachal Pradesh (27.7 cases per 100,000 people).

HPV Vaccine:

• The HPV vaccine is a powerful tool in preventing cervical cancer. It works by stimulating the body’s immune system to produce antibodies that fight against HPV infections, the leading cause of cervical cancer. Vaccination is most effective when given before a person is exposed to the virus, ideally in pre-teens or teenagers.
• Vaccine Availability in India
• The HPV vaccine has been available in India since 2008, but its high cost has made it less accessible.
• Currently, HPV vaccines can only be obtained through private practitioners in India.
• Some states like Punjab and Sikkim have already included the HPV vaccine in their immunization programs.
• The National Technical Advisory Group on Immunization (NTAGI) has recommended the inclusion of the vaccine in India’s national immunization program, particularly for girls aged 9-14.
• The Indian government announced its plans to focus on cervical cancer prevention in its Interim Budget 2024. This marks a significant step toward making the vaccine more accessible to the public.
• Importance of HPV Vaccination for Both Genders: The HPV vaccine is not only recommended for women but also for men and boys. It helps prevent genital warts, and certain cancers related to HPV, including anal, throat, and penile cancers. Boys and young men aged 9–26 should get vaccinated, as well as unvaccinated adults up to 45 years.

HPV Vaccine Options in India

India has authorized several HPV vaccines:

• Gardasil (a quadrivalent vaccine) – Protects against HPV types 6, 11, 16, and 18.
• Cervarix (a bivalent vaccine) – Protects against HPV types 16 and 18.
• Cervavac – An India-made vaccine developed by the Serum Institute of India, which also protects against HPV types 16 and 18, and is approved for ages 9 to 26.
• Cervavac is priced at around Rs 2,000 per dose, making it more affordable than imported options like Gardasil.
• Gardasil 9 costs around Rs 10,850 per dose, while Gardasil 4 is priced between Rs 2,000 and Rs 4,000 per dose.

Challenges to HPV Vaccination in India

Despite the proven effectiveness of the HPV vaccine, there are several challenges that affect its uptake in India:

• High Cost: Vaccines like Gardasil are expensive, making it unaffordable for many.
• Lack of Awareness: Many people are unaware of the vaccine and its importance in preventing cervical cancer.
• Cultural Barriers: Cultural perceptions around reproductive health and vaccination prevent many women from getting vaccinated.

Singapore's President, Tharman Shanmugaratnam, recently visited India, focusing on strengthening bilateral ties and exploring new initiatives in key sectors like technology and manufacturing.

Key-highlights of the Visit

• Singapore’s President visited India to mark the 60th anniversary of diplomatic relations between the two countries. He is focusing on strengthening ties, especially in the eastern states of India, like Odisha and Assam.
  • During his visit, the President underscored the growing partnership between Singapore and India, which has been upgraded to a "Comprehensive Strategic Partnership." This move reflects the desire to deepen cooperation in multiple sectors, including renewable energy, digital technologies, and advanced manufacturing.
• Semiconductor Cooperation: Singapore is looking to help India build a semiconductor ecosystem, including advanced manufacturing and technological solutions. The collaboration aims to enhance India's capabilities in the semiconductor industry, an area of growing global importance.
• Digital and Financial Cooperation: Singapore and India are also exploring a data corridor between Gujarat's Gift City and Singapore. This initiative will allow their financial institutions to safely exchange data, enhancing economic and technological collaboration.

What are India’s Current Semiconductor Capabilities?

• India is strong in the design stage of semiconductors. It is home to 20% of the global talent pool for chip design, with many professionals employed by global companies like AMD. India’s domestic chip design sector is growing, especially with the government’s Design-linked Incentives (DLI) program that supports local design firms.
• Chip Fabrication (Fabs): India is a newcomer in the manufacturing side of semiconductors.
  • Although India has no semiconductor manufacturing plants (fabs) of its own yet, a major step was taken in March 2024 with the launch of India’s first semiconductor fab in 30 years at Dholera. This facility is a joint venture between Taiwan's PSMC and Tata Electronics. The Indian government is funding 70% of the investment, while Tata and PSMC are managing the technology transfer and training.
• India’s Semiconductor Value Chain: The semiconductor value chain has four main stages:
• Design: India has a strong presence here.
• Manufacturing (Fabs): India is developing this area.
• Assembly, Testing, and Packaging (ATP): India could focus more on this to get faster results.
• Distribution: This is the final stage where chips are distributed to electronic manufacturers.

Challenges India Faces in Building Semiconductor Fabs:

• High Cost of Semiconductor Fabs: Building a semiconductor fabrication plant (fab) is extremely expensive. In the early 2020s, the cost of setting up a fab was over $20 billion, a significant increase from USD 200 million in the 1980s. These costs make it a risky investment, especially since achieving technological sovereignty (self-reliance) is not guaranteed.
• Resource-Intensive Nature of Fabs: Fabs need a constant, reliable power supply and vast amounts of ultrapure water (up to 10 million gallons daily) to clean silicon chips. This could put pressure on India’s already strained water resources and energy grid, especially as India works towards meeting net-zero emission targets.
• Shortage of Skilled Workers: There is a shortage of skilled workers in semiconductor manufacturing in India. The National Skill Development Corporation (NSDC) report from 2022 highlights this issue, estimating that India could face a shortage of 250,000 to 300,000 professionals in the semiconductor industry by 2027.
• Dependence on Imports: India is highly dependent on imports for critical raw materials, especially Rare Earth Elements (REEs), which are crucial for chip manufacturing. Despite holding 6% of global REE reserves, India has not developed its mining infrastructure for these materials since the 1950s. Only 10-20% of India's exploration capacity for critical minerals has been used.

India’s Semiconductor Strategy (Moving Forward):

• Short-Term Strategy (ATP Focus): Instead of immediately focusing on expensive and resource-heavy semiconductor fabs, India could prioritize the back-end stages like Assembly, Testing, and Packaging (ATP). These stages are capital-light (require less money) but still labor-intensive and can be more easily integrated into India’s existing industrial landscape. This could be a faster, more feasible way to get involved in semiconductor manufacturing.
• India Semiconductor Mission (ISM): Launched in December 2021, this initiative is crucial for India’s semiconductor ambitions. It offers two key types of incentives:
  • Production-Linked Incentives (PLI): For companies that set up manufacturing units in India.
  • Design-Linked Incentives (DLI): For domestic companies involved in chip design. The ISM also focuses on establishing semiconductor fabs, testing facilities, and design centers within India.

What Needs to Be Done:

• Invest in Fabs: India needs to continue its investments in semiconductor fabrication plants, like the Dholera fab, while ensuring cost-effectiveness and efficiency.
• Develop Resource Infrastructure: India should focus on improving its water management systems and energy supply to meet the needs of semiconductor fabs without overburdening resources.
• Bridge the Skill Gap: India must focus on upskilling its workforce to meet the growing demand for semiconductor professionals. This includes training more engineers and technicians and expanding semiconductor education programs.
• Boost Rare Earth Element Mining: India should begin exploring and developing its reserves of Rare Earth Elements (REEs) to reduce dependence on imports, ensuring a steady supply of critical materials for semiconductor manufacturing.
• Support ATP Development: India should prioritize developing the ATP (Assembly, Testing, and Packaging) part of the semiconductor process, as it is more cost-effective and can be rapidly scaled.

The Indian rupee recently saw a sharp devaluation against the US dollar after remaining relatively stable for over two years.

What is an Exchange Rate?

• An exchange rate is the value of one country's currency in terms of another country's currency. It tells you how much of one currency you need to buy a unit of another currency.
  • For example: If 1 US Dollar (USD) equals 75 Indian Rupees (INR), the exchange rate between the US Dollar and the Indian Rupee is 75 INR per USD.
• Types:
  • Nominal Exchange Rate: This is the price of one unit of foreign currency in terms of the domestic currency. For example, how many rupees it takes to buy one dollar.
  • Real Exchange Rate: This reflects the relative prices of goods between two countries. It shows how cheap or expensive domestic goods are compared to foreign goods after considering the exchange rate.

The exchange rate is influenced by the supply and demand for foreign currencies in the market. If there’s a higher demand for foreign currencies (like the dollar), the domestic currency (rupee) may weaken or depreciate.

Exchange Rate Policies:

India follows a managed floating exchange rate regime. This means the Reserve Bank of India (RBI) manages the exchange rate by adjusting the supply of foreign currency in the market and intervening when needed. In this system, the RBI may let the currency fluctuate but can intervene to prevent excessive depreciation or appreciation.

• Fixed Exchange Rate: The central bank fixes the exchange rate and uses reserves to maintain it.
• Floating Exchange Rate: The currency value is determined by the market forces of supply and demand, and the central bank does not intervene.
• Managed-Floating Exchange Rate: A hybrid system where the central bank manages the currency, intervening when necessary but letting the market decide to some extent.

Since the 1990s, India has followed a managed-floating regime, with the RBI intervening in the market when there is excessive demand for foreign currency or excessive appreciation of the rupee.

Why Did the Rupee Depreciate?

There were two main reasons for the rupee's sharp depreciation:

• Higher Capital Outflows: With investors pulling money out of India, the demand for foreign currency (like dollars) increased, leading to depreciation of the rupee.
• Increased Imports: Rising crude oil prices increased India's import bill, further increasing demand for foreign currency.

The RBI allowed the rupee to depreciate to ease the pressure on its foreign exchange reserves.

Implications of the Depreciation:

A depreciation of the rupee can have both positive and negative effects on the economy:

• Positive Impact:
  • Exports may increase: A cheaper rupee makes Indian goods cheaper for foreign buyers, potentially increasing exports.
  • Competitiveness improves: Indian goods become more attractive in the global market as they become relatively cheaper.
• Negative Impact:
  • Rising Domestic Prices: As the rupee weakens, the cost of imported goods (like raw materials) rises, leading to inflation.
  • Cost of Living Increases: Imported goods and services, including fuel, become more expensive, which impacts consumers.

However, the effectiveness of depreciation in improving exports has been limited recently due to rising domestic prices. This is because the real exchange rate (which considers inflation and domestic prices) has been rising despite the nominal depreciation of the rupee. In simpler terms, domestic prices have been rising, making Indian goods relatively more expensive even though the rupee has weakened.

The Policy Question:

• What should India’s exchange rate policy aim to achieve?
  • Should India continue with its managed-float regime or switch to a more explicit exchange rate policy?
  • The recent shifts in the rupee’s value suggest that the RBI's policy stance might be inconsistent and has lacked a clear direction. For example, the RBI has often changed its approach without clearly explaining the reasoning behind these shifts.

The challenge lies in ensuring that the depreciation of the rupee does not lead to higher inflation or higher domestic prices while also trying to support exports and manage the current account deficit.

During the Jallikattu bull-taming festival in Tamil Nadu, four people tragically lost their lives. The festival, held during Mattu Pongal (the second day of the four-day Pongal festival), is a long-standing tradition where people participate in bull-taming events to celebrate the role of bulls in agriculture and rural life.

Key Details About Jallikattu:

• Jallikattu is an ancient sport that is seen as a celebration of Tamil culture, bravery, and the bond between humans and animals. It involves participants trying to tame bulls in an arena, often risking injury.
• This festival takes place during Mattu Pongal, the second day of the four-day Pongal festival, honoring cattle, which are vital for agriculture and rural livelihoods in Tamil Nadu.
• Bulls like Pulikulam and Kangayam, known for their strength and agility, are specially bred for this sport. These bulls are treated with great care and are revered in some communities.
• How It Works: A bull is released into an arena, and participants attempt to grab its hump and hold on for a specific time (usually around 30 seconds), often covering a distance of 15 meters.
  • If successful, they win prizes such as cash, cars, and tractors.
  • However, this activity comes with significant risks, and many people get injured or even killed.
• Since 2017, 126 people and 42 bulls have died during Jallikattu events. This year's festival also saw one bull tamer killed, and 75 others injured (30 seriously). Despite safety regulations like limiting bulls to one competition, such tragedies still occur.

Legal and Social Debate:

• Legal History: The legality of Jallikattu has been a controversial issue. In 2014, the Supreme Court banned the sport due to concerns about animal cruelty. However, in 2017, after protests and political pressure, the Tamil Nadu government passed a law allowing Jallikattu to continue, though the issue remains contested by animal rights groups like PETA.
• Animal Welfare Concerns: Animal rights groups argue that Jallikattu is cruel to the bulls, and the risks to both animals and participants are high. While supporters argue it is a key cultural tradition, the debate continues over whether the sport is worth the human and animal costs.

The government has approved the formation of the Eighth Pay Commission for central government employees.

What is the 8th Pay Commission?

• The Pay Commission is responsible for determining the salaries, allowances, and pensions of central government employees and pensioners.
• It plays a crucial role in setting the financial terms for the workforce of the government.
• The recommendations made by the Pay Commission generally lead to increased salariesand other benefits.
• Timeline for the 8th Pay Commission:
  • The 7th Pay Commission was implemented in 2017, and its recommendations were effective until 2026.
  • The 8th Pay Commission will be formed before 2026, and its recommendations are expected to be implemented from January 1, 2026.
• Impact of the 8th Pay Commission:
  • The 8th Pay Commission will benefit approximately 4.5 million central government employees and 6.8 million pensioners, including defence personnel.
  • In Delhi alone, about 400,000 employees (including those from the Delhi government) will also be affected.
  • This move is also timed strategically before the Delhi Assembly elections on February 5, which could have political and economic significance.
  • The increased expenditure due to the pay commission is expected to lead to a boost in consumption, stimulating economic growth, just like the 7th Pay Commission did, which resulted in an increase of Rs 1 trillion in expenditure.

A ceasefire deal between Israel and Hamas has been brokered, allowing for the release of hostages and Palestinians, humanitarian aid to Gaza, and a temporary halt to hostilities. This deal, mediated by the US and Qatar, provides a glimmer of hope after over 15 months of brutal conflict.

Ceasefire Deal Details:

• Hostage and Prisoner Swap: 33 Israeli hostages will be released in the first phase, while Israel will free 1,000 Palestinians, including life-sentenced prisoners.
• Humanitarian Aid and Evacuations: The ceasefire will enable the flow of humanitarian aid into Gaza and the evacuation of injured Gazans for treatment in Egypt.
• Uncertainties and Legal Challenges: While Hamas agreed to the deal, Israel’s cabinet needs to ratify it, and legal challenges might delay the process, particularly regarding the list of Palestinian prisoners.

Challenges and Future Prospects:

• Internal Palestinian Divisions: The Palestinian National Authority (PNA) will likely take charge in Gaza, but this faces significant hurdles, as the PNA has not operated in Gaza since Hamas’s takeover in 2007.
• Post-Ceasefire Uncertainty: Despite the ceasefire, questions remain about the complete withdrawal of Israeli forces, the reconstruction of Gaza, and the future of leadership in Palestinian territories.
• International Influence: The involvement of the Iran-backed “axis of resistance,” including Hezbollah, and the Biden administration's role as a mediator remain uncertain, potentially affecting the ceasefire’s longevity.

Practice Question:

Q. Discuss the terms and implications of the recent Israel-Hamas ceasefire deal. How does it reflect the challenges of achieving long-term peace in the region?

S N Subrahmanyan, Chairman of Larsen and Toubro (L&T), faced criticism for his suggestion on working long hours. His comments were misunderstood, leading to a debate on work culture in India. The author defends Subrahmanyan’s views and critiques the growing culture of vacation and holiday mania in the country.

Work Culture in India:

• Value of Hard Work: India’s ethos has traditionally emphasized hard work and duty over leisure. Concepts like Karmayog (work as worship) and devotion to one’s task are integral to the culture.
• Rejecting Vacation Mania: The culture of taking frequent vacations is a colonial hangover, where people were encouraged to adopt a lazy work culture during British rule.
• Ideal Leadership: The author references Prime Minister Modi’s tireless work ethic, suggesting that his example of not taking holidays should inspire the nation to adopt a diligent approach to work.

Economic and Social Implications:

• Work and National Prosperity: For India to become a global manufacturing hub and uplift the living standards of its people, there is a need for hard work and reduced focus on holidays.
• Impact of Public Holidays: Frequent holidays disrupt the economy, reduce productivity, and harm public work. Government declarations of holidays, especially for political reasons, contribute to economic stagnation.
• The Reality of the Workforce: Many people, especially in the unorganised sector, work tirelessly with little to no breaks. The author argues that instead of advocating for more holidays, society should respect such hard work and aim to lift people out of poverty.

Practice Question:

Q. Critically examine the growing culture of work-life balance in India. How does the emphasis on hard work contribute to national development, and what are its implications for the economy?

ISRO’s PSLV-C60 mission successfully demonstrated the Space Docking Experiment (SpaDeX), showcasing the ability of two satellites to rendezvous and dock in space. This is a crucial step for future interplanetary missions and satellite servicing.

Space Docking Technology:

• Orbital Rendezvous and Docking: SpaDeX demonstrated the ability to dock two satellites in space, allowing the assembly of larger space modules and overcoming payload weight limits of rockets.
• Multiple Attempts for Success: Initial attempts to dock were unsuccessful, but adjustments were made, and after multiple trials, the docking was finally achieved.
• Testing Post-Docking Capabilities: After docking, ISRO tested the exchange of electric power between the satellites and conducted undocking, separation, and payload testing.

Significance for Future Space Missions:

• Gateway to Long-Duration Missions: Docking technology enables the creation of larger spacecraft in orbit, facilitating deep space missions like Mars exploration.
• Support for Lunar Missions: Docking is critical for ISRO's Chandrayaan-4 lunar sample return mission, enabling complex space operations.
• Expansion of Space Infrastructure: ISRO’s plans for a space station (Bharatiya Antariksh Station) rely heavily on docking technology for orbital resupply and crewed missions.

Practice Question:

Q. What is space docking and how does it enhance future space missions? Discuss the significance of ISRO's SpaDeX mission for India’s space program.